Multimedia hits home

Technology, like organic matter, evolves. In the past 20 years,
CDs have replaced your vinyl, you take ballroom dance lessons while your VCR tapes Beavis and Butt-head, and Grandma replies to your email within an hour.

Now, another evolutionary landmark is upon us. The digital video disc, or DVD, promises to be the medium of choice in the home for film, audio, multimedia software, and even games.

DVDs look just like CDs: five inches across, shiny silver, a hole in the middle. The difference is what you can't see. DVDs will initially store 4.7 GB of data--more than
enough for a two-hour movie with extra multimedia features--and will
eventually hold up to 17GB of data (see infographic). CDs max out around 650MB.

Also known as the "digital versatile disc," the DVD will appear in a few months
after a year of infighting among the various industries involved
in its production. Also slated for a spring rollout are DVD
decks and computers equipped with DVD-ROM, not CD-ROM, drives.

In evolutionary terms, DVD video players are next-generation laserdisc players--made for high-quality, home-theater experiences with crystal-clear video, and even surround sound. On the personal computer side, the DVD is like a CD-ROM on steroids: faster, with more video, and, for the moment, more expensive.

Yet even with its technological wizardry, the DVD's future could be limited to the less spectacular role of a better and faster compact disc. While key industry ducks are lining up to support the new format, the DVD still faces the challenges of a crowded marketplace, consumer expectations, copyright-conscious corporations, and international politics before having any kind of dramatic impact now promised.

As a film medium, the DVD could also follow the disappointing path of technologies like Betamax, spurned by the mass market but adopted by niche-market professionals and technophiles for its high-quality resolution. One major drawback is the DVD's inability to record, a function VHS users take for granted. Another is the need for related hardware upgrades--everything from faster CPUs to a roomful of audio speakers, if consumers are to take full advantage of DVD capabilities.

The DVD's combination of promise and risk translate to undeniably high stakes for both advocates and detractors in Silicon Valley, Hollywood, Tokyo, and Wall Street. The consumer electronics industry sees the platform as the cash cow of the early 21st century. Entertainment producers are more wary, fearing a potential gold mine for software pirates taking advantage of perfect digital duplication. Multimedia developers see it as creative freedom from CD-ROM's limited capacity. And the video retail industry just wants the whole thing settled.

It won't take long for these massive forces to collide: The DVD is coming this spring.
Although this first rollout will offer only a fraction of the technology's potential, top companies are anxious to get the discs to the high-end technophile market.

"At the moment, people just want to get the one-movie-per-DVD out the door," said Stephan Somogyi, principal of technology consultancy Gyroscope. A survey by the Consumer Electronics Manufacturers Association shows that 40 percent of households contacted say they are interested in buying a DVD player.

DVDs will ultimately play in four types of machines: standalone video players, PCs, game boxes, and audio-only devices. But audio and game players for the format are still in development. The initial launch is split into two camps--films and computers--and the industries behind DVD are counting on the home movie market to provide the initial groundswell.

"In the initial development, it will be developed as two distinct categories of product," said Mike Fidler, vice president of DVD marketing for Sony Electronics. "DVD Video will focus on taking consumers from the analog world of video to the digital world."

Standalone video players in the $750-to-$1,000 price range will tempt home movie buffs with near-master-quality visuals and surround-sound audio, plus bells and whistles such as multiple camera angles, separate language tracks, and parental choice of ratings, i.e., the PG or R version of Saturday Night Fever. Sony's Columbia TriStar, MGM, and Warner Bros. studios are each releasing a handful of popular and classic titles ranging from Space Jam to Doctor Zhivago for the launch, and there could be as many as 600 titles available by the end of the year.

The second DVD camp is computers, as companies such as Sony, Toshiba, and Compaq Computer ship PCs this year with DVD-ROM drives where the CD-ROM players used to be. According to James Staten, industry analyst at research firm Dataquest, DVD-ROMs will first appear in high-end PCs and contribute $300 to $350 to the price. That added cost will decrease in the following quarter by about $100 and spur sales quickly in the year to come.

"We'll be at 10 million units [shipped] in four to five quarters," Staten said.

But very few, if any, multimedia DVD-specific titles will be available for PCs this spring, and DVD movies from the film industry won't look great even on the most sophisticated multimedia-enabled computer.

The narrow marketing focus might be the right strategy, according to Paul Saffo, director of the Institute for the Future based in Menlo Park, California.

"The danger is that DVD could be positioned as the 'ginsu knife' of media, but I don't think that's happening," he said. "This is a way to have really good hi-fi video and audio. We know there's an audience who will buy that."

But previous attempts at high-quality A/V home equipment have remained marginal: Consider the Betamax or the laserdisc. The DVD does have some advantages, however, bearing the five-inch CD look that is familiar to a consumer market that has become far more comfortable with technology in general.
At the same time, computers and televisions are creeping ever closer. The Federal Communications Commission has just approved a blueprint for shifting television sets and broadcasts from analog to digital, which could set up DVD as the platform that could bring interactivity to the digital TV of the future. Also a factor is the practice-makes-perfect principle.

"Multimedia optical storage is littered with the corpses of failed efforts and [its] modest successes," Saffo said. "We've learned from all those lessons. This is finally about the right time to have one take off."

Referring to conventional Silicon Valley wisdom, Saffo added that "most ideas take 20 years to become an overnight success."

According to InfoTech, a market research firm based in Woodstock, Vermont, the mass-market DVD video player will hit 7 million units sold in 1999. At that point, all the major studios should commit to releasing films on DVD, according to InfoTech chairman Julie Schwerin.

InfoTech's analysis states that a range of 7 million to 10 million units installed represents the threshold where products move from niche to mass-market status (see timeline). Sales of DVD video players will hit 80 million by 2005 due to unit prices hitting a sweet spot around $250, Schwerin said.

In contrast to the hardware industry's initial marketing push, Schwerin thinks sales of DVD-equipped computers will drive the technology into the mass market by building an economy of scale that pushes prices down.

"We think DVD-ROM will be the fastest selling of the formats," Schwerin noted. "DVD-ROM in this case will underwrite the technology for DVD Video by providing volume and incentive for manufacturers to continue with the other branches."

But will consumers initially pay for expensive PCs if the new, specialized software is slow to develop? It's quite possible that even without much initial DVD software, someone with a DVD-equipped PC can bide time with CD-ROMs.

"Backwards compatibility is a cornerstone of the platform," said Sony's Fidler. "Understandably, obsolescence is a great fear among consumers."

Because DVD is not that much different than its evolutionary
predecessor, there's also a solid base of CD-ROM developers who can make DVD software once they see sufficient interest. Some developers are already on board.

"We have very video-intensive ideas for projects," said George Reynolds, multimedia producer at Sumeria. "But we always have to cut back on video to squeeze our projects on to CD-ROM. We've proceeded to configure our projects to be suitable for DVD."

The numbers look good so far. But the fickle nature of consumers is infamous and well-documented.

One major issue that could stall sales in both the home theater and PC camps is recordability. For the forseeable future, DVDs will be playback-only. Despite its gourmet appeal, the DVD's inability to record Monday Night Football, Seinfeld, or a movie on Showtime might deter buyers who already have a VCR and find videocassette quality good enough.

Playback-only kills potential DVD adoption by PC users who want to take advantage of its gigabytes of storage. In addition, other storage media are on the way with higher capacity and faster seek times, according to Staten of Dataquest.

Although recordability seems utterly practical, we shouldn't expect DVDs to record anytime soon. Content providers, mainly film studios and record labels, are scared to death of digital replication. Images of illicit Third World assembly lines stamping out perfect bootleg copies of Die Hard and its ilk dance through executives' heads, although efforts to add an encryption mechanism to playback-only discs were successful enough to get Columbia, Warner, and MGM on board.

DVD Video won't replace VCRs until they have recording functionality, and that won't happen until "sometime in the next century," Sony's Fidler said. Nonetheless, he doesn't see that as an obstacle to player sales in this century, banking on movie buffs who want to collect high-quality film versions for home collections.

As for computers, DVD-ROMs might be able to record earlier, but the technology won't even be in development until 1998, Fidler added.

Another concern is studio support. Representatives from the home video divisions of Walt Disney, 20th Century Fox, and Paramount--all of which were conspicuously absent from last week's DVD debutante ball at last week's Consumer Electronics Show in Las Vegas, Nevada--said that their companies had no immediate plans for DVD. Their absence could undermine consumer enthusiasm at first, especially when present-day consumers have so many options for home movies at their fingertips, such as cable, videotape, and satellite.

"It's going to be tough if three of the major studios aren't on board for the launch," said John Thrasher, vice president of video purchasing and distribution at Tower Records and Video, which has 159 video retail and rental outlets worldwide. "It's a hard launch if people can't get things like Toy Story, Independence Day, and 101 Dalmatians."

Studio officials refused to say what specifically was keeping them from announcing their support. Copyright protection certainly remains an issue. The entertainment and computer industries went toe-to-toe last year over copyright, which Hollywood and friends felt deserved protection through legislation. The computer industry, which has recently proved capable of flexing some political muscle, is steadfastly opposed to government regulation of technology, but legislation to punish circumvention of copyright law without any technological mandate could be more palatable in Silicon Valley. Despite the encryption agreement for playback-only DVD, legislation this year remains a possibility.

Studios are not the only ones with a wait-and-see attitude. Blockbuster has agreed with Sony to run DVD demonstrations in selected stores this spring, but company officials have not yet announced if they will actually rent or sell DVDs. Thrasher of Tower said his stores had no final plans but would not rent the discs at first: "There won't be enough players in the marketplace to make it cost-effective. If indeed DVD becomes the configuration of the universe, then we'll rent it, but I think it's got a long a way to go to challenge VHS."

Even those who cater to videophiles aren't jumping right in. Representatives of Le Video, an independent San Francisco video store with a wide selection of classics, foreign films, and laserdiscs, said it would make its decision based on the amount of DVD titles coming out and customer requests.

Ultimately, it will be the connoisseurs who drive the adoption. The more people there are who absolutely must have the latest and greatest, the faster the price of DVD players and discs will fall, and the faster the general audience will grow. An expanded installed base will in turn give developers the incentive to work with the technology in new, creative ways, and that--not industry hype--could make the DVD the evolutionary step that brings information and entertainment media into an integrated digital space.

"DVD will create a demand for high-resolution TV screens," said Reynolds of Sumeria. "Once that happens, then the computer as a living room device is a real possibility, with a screen that shows a lot of pixels. I see DVD as another brick in the future of when the computer replaces the TV as a data screen."

And if DVD doesn't spur the paradigm-shifting convergence that always seems to be looming on the horizon? At least it will be a CD-ROM done right.